Need somebody with experience to look at these loan options!

3 Replies

Thanks for taking a look. I understand most of it, but there are probably some things I am missing. If I can find a cosigner, I would be able to get in portfolio select. Without, I would definitely be able to get the cash flow loan. 

Blocked out the name because I am not here to advertise or sell anyone anything.

This is the portfolio stuff that is starting to come online, now that Wall Street is starting to re-develop an appetite for folks that can't check all of the zillion Fannie/Freddie boxes. Wall Street is paying 2-3 points on the back end for the paper, meaning you the borrower do not need to pay 3-4 points on the front-end - less than 1 point is typical. This is bad news for hard money lenders. Wall Street is also comparing the interest rate to their alternative index fund-type returns, so the rate will beat hard money loans as well. Most of the end-lenders have zero desire to interact with consumers directly, so these are typically available through your local mortgage broker and not your credit union or big bank.

Rates will start right where Fannie stops, in the low 5s, and go all the way up to double digits where hard money picks up. It's good that we have stuff filling this gap in between Fannie and the loan shark on the corner. Where you fall, in between 5% and 9%, is up to you more than anything else. There aren't that many different mortgage backed securities bundling these things as of yet, basically one for each category & risk profile, just like you see. These are in no way gov't subsidized, so you will not see subsidized terms like 95% LTV with a great rate on a 30YF - whatever ISN'T in the ad, is obviously where they are going to "get" you. I usually lead with the "get." These are, arguably, far more rational than the Fannie/Freddie stuff.

Wall Street is still a bit skittish about being burned again, so these aren't NINJA loans, and require skin in the game. These are picking up in popularity here in the Bay Area, and we've done a lot in the last year in particular, because as hard as it is to qualify for a Fannie loan, it's even harder to qualify for a jumbo loan.

Excellent insight as always, @Chris Mason .

For a clarification, what should I look for in the fine print? What sort of "Gets" would you expect?

Originally posted by @Dillon Leider :

Excellent insight as always, @Chris Mason.

For a clarification, what should I look for in the fine print? What sort of "Gets" would you expect?

The CFPB stuff still applies, so there will be an LE, and  here's your "funny business" column that's all "no" for the Fannie/Freddie stuff. A mortgage "feature" below is a euphemism for "get" or "funny business" or whatever term you want to use.

Asking for a fee at the preapproval stage, before you have seen this document after having a ratified contract, remains a red flag. It should still go [ find lender you get along well with via networking or BP or meeting in a bar or realtor referral or whatever -> send her paperwork -> preapproval -> look at houses -> write offers -> ratified contract -> legally binding Loan Estimate that looks like the above -> now is the soonest anyone should be asking for any fees. ]

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